Around 5000 companies across the nation have to justify GST transition credit.
In lieu of a letter furnished by the Central Board of Excise and Customs (CBEC), dated 11th September 2017, the indirect tax department kick-started its investigation spree.
The Chief Indirect Tax Commissioners needs to verify all transitional credit claims of and beyond Rs 1 crore.
Point of Contention!
- Almost 5000 companies came under the preview of the tax officials.
- These companies included some big players who are listed in the BSE 500 list.
- Due explanations on transition credit claimed in July 2017 is sought.
- Many CFO’s and senior executives of finance departments were called to the department
- An exhaustive inspection is conducted to tally the input tax credit claimed.
- Companies have to submit the following:
- Historical Data of Indirect taxes paid, including VAT, sales tax
- Invoices for transitional credit
- Inventory records for the past one year
On the failure to either reply or furnish details, tax penalties are levied.
What are Transitional Credits
Transitional credits are tax credits apportioned before the advent of the Goods and Service Tax.
It is the accumulation of an excess of the input over the output tax credit before 1st July 2017 on the pre-GST stock.
What initiated this drive
The tax authorities suspected some misusing of certain provisions under the nascent GST due to the following:
- 95,000 crores were collected as total GST revenue for July 2017
- Around Rs. 65,000 crores are claimed by way of refunds or transitional credits
- Many fake returns were discovered to escalate transitional credits.
- Many companies had incomplete documentation to claim credit.
Owing to such irregularities, CBEC has made genuine attempts to nip any loopholes for tax evasion by duly checking the eligibility of credits under the GST regime and by matching the credit claimed with the closing balances of the returns filed under different laws before GST.
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